Border, known as "Captain Grumpy" during his playing days, said the team needed to "stand up and be counted" if they are to turn around the five Test series, which England are leading 2-0.
Australia lost the second Test at Lord's on Sunday by a massive 347 runs, putting them on a six-Test losing streak, their worst run in 30 years.
"Our major concern right now is the performance of the top six," said Border, who played 156 Test matches for Australia, captaining the side 93 times as it rebuilt in the mid-1980s, laying the foundations for a long period of dominance.
"Watching, I could honestly say the nine, 10 and jack looked more competent than our one, two and three.
"If that was me in the top three I'd be embarrassed."
While Usman Khawaja managed to knock 54 in the second innings coming in as number three at Lord's, Chris Rogers and Watson again failed to fire and Border suggested Watson was living on borrowed time.
"We all know what a wonderful player Shane Watson is. He looks like a million bucks when he's firing," he said in a comment piece to Cricket Australia subscribers.
"What is worrying though is that he keeps getting out in the same fashion. Now who is to blame here? Is it Watson for not adapting? What about the coaches?"
Watson has fallen lbw three times in four innings in the series so far as an opener and has not scored a Test century in 43 innings.
"In an era where we've got a thousand coaches and psychoanalysts and dieticians and sport scientists it defies belief that a player can be making the same mistakes. Whether it is a technical thing or a mental thing I don't know," said Border.
But Border also cautioned selectors against constantly chopping and changing the side, saying he was "a believer in the pick and stick method".
"So we need to find our best 11 that's suited to the conditions and stick with it."
He suggested Nathan Lyon would need to replace Ashton Agar for the third Test at Old Trafford. While the teenager memorably hit 98 on his debut in the first Test as a number 11, he went wicketless at Lord's.
Border also suggested Matthew Wade could replace Steve Smith as a batsman.
"Our batting was seen as our Achilles heel heading into the series and right now it's turning into a reality. If we can find the right formula for the top six I'm confident our luck can turnaround in Manchester," added Border, who scored 11,174 Test runs.
The Ashes: Allan Border flays Aussie top-order, says tail can bat better
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